全球REIT周度分析报告.docx

EquitiesGlobalReal EstateOsmaan Malik, CFA Analyst +44-20-7567 3026Grant McCasker, CFA Analyst +61-2-9324 3626Michael Lim Analyst +65-6495 5902Edwin Chen, CFA +86-105-832 8186Toshihiko Okino Analyst +81-3-5208 6197Charles Boissier, CFA Analyst +44-20-7568 4415FrankLee,CFA Analyst +1-415-352 5679Global Research 25 January2019REIT all about it - Issue 861In this week's "REIT all about it”Performance OverviewOver the past week, Global Real Estate has returned +0.7% and Global Equities +0.5% in USD. Regionally, Hong Kong performed strongest (+3.1%), while Australia performed weakest (-0.2%), in local currency.Japan - Still bullish on the major real estate developersThe share prices of Japan's major real estate developers relative to TOPIX correlate closely with the CPI. If expectations for inflation rise even modestly from here on, their share prices should benefit, in our view. Sumitomo R&D's share price has consistently outperformed TOPIX since October 2016. The three leading developers' share prices look undemanding at their current levels, trading at a discount to NAV of about 50%. The gaps that have emerged in the realestate developers' share price performance over the past two years are largely attributable to differences in their capital efficiency, as demonstrated by RoE. Awareness of management efforts to improve capital efficiency is also steadily increasing. Mitsubishi Estate could commit to the biggest change in governance given the current undervaluation in its share price. At the three leading developers, profit from leasing operations generates c.60% of the total, keeping profit stable. Also, with net D/E ratios at only about 1.2X, Mitsui Fudosan and Mitsubishi Estate have fairly robustfinances compared with the medium-sized developers. (Link)Australia: Forecasting Sydney and Melbourne rents #5We have reviewed the UBS Evidence Lab office rent forecasting model. The results are mostly positive. After Sydney (c.60% of REIT office portfolios) delivered 15% net effective rent growth in 2018, the forecast for 2019 is 12% (Agency forecast 7%). In Melbourne the forecast is 4% (Agency 3%) in 2019 after delivering 7% in 2018. The data supports our upgrade of DXS to Neutral and increase in PT for GPT. Our preferred office exposures in order are: CMA, DXS, GPT, MGR. Across the sector our preferences are VCX, SCG and GMG. Least preferred names are SGP, and MGR. The market is looking for continued pressure on the retail sector and residential sectors, leaving office and industrial as a default position.Valuation (excluding emerging markets)As of 24th January, our universe under coverage is trading at 10.9% disc. to our NAV estimate, a 2019E P/E at 15.9x, 19E DPS yield at 4.0% & we are forecasting 2019-20E EPS growth of 5.5%. Net debt to EV is 26%.Figure 1: Total Returns Calendar YTD as of 24 January 2019 (USD) Absolute Relative to Domestic EquitiesSource: As of 24 January 2019. Source: FTSE, EPRA, NAREIT, Thomson Reuters Datastream, UBS. Regional/country real estate total return figures calculated using the FTSE EPRA/NAREIT (total return) real estate indices.This report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 30. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.HK/ChinaFirst Read China Fortune Land Development - Replicating success outside the Beijing- Tianjin-Hebei area, financing ability to continue to improveLarge increase in property sales area, rebound in industrial park sales growthCFLD saw property development sales of Rmb129.2bn in 2018, an increase of 8% YoY, which is in line with the company's previous estimates. Sales area saw a large YoY increase of 58%. Settled industrial park revenue rose 5% YoY in 2018, with a rebound in Q4 growth to 13%.Non-BTH sales continue to ascend, with success replicated in different areasThe large increase in CFLS's 2018 property sales area is largely due to a 144% increase in sales outside the Beijing-Tianjin-Hebei (BTH) area, with the proportion of non-BTH sales rising to 61% in Q4-the highest in recent years. The relatively low price of property outside Beijing, led to slightly low growth in overall sales, but we estimate that the company will maintain moderately healthy sales profits. Carried- over property development area increased 119% YoY in 2018, and the structure of carried-over projects in 2018 was similar to the structure in 2017. Growth in revenue from property development may have exceeded our estimate of 41%.Financing advantage from Ping An's acquisition of CFLD shares more apparentThe company also announced that it issued Rmb2.5bn worth of ultra-short-term financing vouchers with a 5.5% coupon rate, the lowest coupon rate and longest maturity among similar vouchers that the company has issued since 2018. We think this issue of vouchers together with the USD-denominated debt that CFLD issued, the Rmb7bn in public debt it raised in December 2018, and its implementation of a Rmb6bn creditor's rights plan, shows the financing advantages that Ping An's acquisition of CFLD shares has brought to CFLD.Valuation: Maintain Rmb31.98 price target, reiterate Buy ratingThe company*s share price is at5.1x2019E P/E, implying a 65% discount to NAV, a historical low. When Ping An acquired CFLD's shares, CFLD signed a performance commitment in which it undertook to achieve net profit attributable to parent CAGR of 27% from 2018-20. The company's ability to achieve its earnings goals might be relatively assured. We think the company's valuation should increase, considering that it has replicated its success in developing industrial parks in areas outside Beijing, and considering that it has alleviated market concerns about the success of its non-BTH business and debt problems. Our price target is based on a 2019E P/E multiple of 6.2x, which is 1.1 standard deviations lower than the company's historical average.Real EstateRATING: BuyPrior: UnchangedTARGET: Rmb31.98Prior: UnchangedPRICE: Rmb26.06MCAP: Rmb78.3bnEPS ESTIMATES: 12/18E:3.93 12/19E:5.16 12/20E: 6.86 RIC: 600340.SS BBG: 600340 CHAnalyst:Edwin Chen, CFA +86-105-832 8186Source: This is an extract from UBS research published on 21 January 2019First Read Sunac China - Strong Land Acquisition Capability, Another M&A in PrimeLocations. BuyWhat's new:Sunac announced they have entered into an agreement to acquire two property projects in Shanghai and Beijing from Oceanwide Holdings (000046.SZ). In addition to the cash consideration of Rmb12.55bn, there is also assumed debt of Rmb27.92bn. The Beijing project, with total GFA of 669k sqm, is located at the core area of Chaoyang District, and comprises residential, commercial, office and hotel usages. On the other hand, the Shanghai project, with saleable GFA of 628k sqm, is located at the prime area of Huangpu District, and comprises mainly residential development.Two projects with IRR of 30%+ and net margin of 10%We have talked to the company, and the implied land acquisition cost is Rmb72k/sqm and Rmb54k/sqm forthe Shanghai and Beijing project, respectively, based on saleable GFA. This compares with the nearby ASP of Rmb130k/sqm for both projects. Sunac estimates that the IRR of the Shanghai project will be over 30%, while that of the Beijing one could reach 50%+. In addition, Sunac expects the net margin for these two projects to be over 10%. We view the acquisition as a positive to Sunac, and in line with our view on the accelerated sector consolidation amid a slowing property market.Is the acquisition contradictory to Sunac's deleveraging plan?We think no. Given Sunac's achieved contract sales of Rmb460.8bn in 2018, we see the company needs to replenish saleable resources of at least Rmb460bn per annum in order to maintain its contract sales going forward. We estimate these two projects may contribute saleable resources of Rmb104bn, based on the saleable GFA of 0.8m sqm and ASP of Rmb130k/sqm. We expect Sunac will continue to deleverage, due to its rising net profit which enhances its book value.Valuation: Sunac is trading at 4.3x 2019E P/E, vs its historical average of 4.8xWe reiterate Buy on Sunac. Our price target of HK$32.5 is based on a target 5.5x 2019E PE.Real EstateRATING: BuyPrior: UnchangedTARGET: HKS32.50Prior: UnchangedPRICE: HK$26.35MCAP: HK$116bnEPS ESTIAAATES:12/18E:3.4212/19E:5.3012/20E:6.76RIC: 1918.HKBBG: 1918 HKAnalyst:John Lam, CFA+852-2971 6358Source: This is an extract from UBS research published on21 January 2019Shenzhen Overseas Chinese Town - Value to be unlocked from synergy between core segmentsOCT to maintain steady, high-quality growth; resources and returns attractiveWe initiate coverage of Overseas Chinese Town-A (OCT) with a Buy. OCT develops property mainly in tier-1 &2 cities, operates theme parks, and has a comprehensive tourism development model. The stock trades at4.6x 2019E PE, well below the property and theme park peer averages (6.2x/18.1x).The market seems overly concerned about: 1) the sustainability of the property segment's profitability; 2) competitive pressure on theme parks; and 3) the growth potential of comprehensive development. We think OCT will sustain its steady, high-quality growth. Its rich resources and 2019E dividend yield of 6.5% will likely support its share price, while better information disclosure may be a catalyst for re-rating.Property, the core revenue driver, set to keep steady growth/high profitabilityThe property business contributed >80% of 2017 revenue. It is focused on upgrade demand in core cities and is well positioned for the long term trend, while sales in higher-tier cities are set to be be stronger than in lower-tier cities in the near term. Comprehensive development further benefits its tourism properties. We expect it to maintain this strategy and estimate 2018-20 booked GPM at 60%. The implied GPM of new projects acquired since 2017 may be >50%. Supported by OCT'S resource advantages, we expect a modest rise in turnover to lead to steady sales growth.Tourism segment to post faster growth; better disclosure may drive re-ratingOCT is a theme park industry leader and its projects attracted over 35m visitors in 2017. We think: 1) sustained investment in existing theme parks will keep OCT competitive; and 2) new theme parks and new tourism businesses will boost growth. We expect tourism revenue (excluding properties) to post a 2018-20 CAGR of 13%. OCT plans to improve information disclosure for tourism segment, which we think will help investors better understand its comprehensive development model, leading to a re-rating.Valuation: Rmb7.30 PT implies 5.4x 2019E PE and 41% discount to NAVThe stock trades at 4.6x 2019E PE (1.8 SD below its historical average) and a 51% NAV discount. The valuation is at a record low. 2019E sales growth of 22% is slightly below property peers, but the tourism segment warrants a higher valuation. We apply a 2019E PE of 5.4x, in line with its historical discount to property peers (13%). We have a Buy rating.Source: This is an extract from UBS research published on 22 January 2019Real EstateRATING: BuyPrior: Not RatedTARGET: Rmb7.30Prior:-PRICE: Rmb6.16MCAP: Rmb50.5bnEPS ESTIMATES:12/18E:1.1512/19E:1.3512/20E: 1.49 RIC:000069.SZ BBG:000069 CHAnalyst:Edwin Chen, CFA +86-105-832 8186UKFirst Read C叩co - FY18 results preview, trimming NAV and PTReal EstateRATING: BuyPrior: UnchangedTARGET: 310p(-3.12%)Prior: 320pWe forecast NAV to edge down to 329pWe refine our model ahead of Capco's FY18 results due 27th Feb. We trim our NAV forecasts by 4%, now expecting 329p per share (a fall of 1.5% from Jun-18A of 334p). We cut our PT by a similar magnitude, to 310p (from 320p).Covent Garden: rental growth to be absorbed into the yield, values flatPRICE: 239pMCAP: £2.03bnPRICE: 239pMCAP: £2.03bnWhile London retail has provided resilience in the face of wider UK retail issues, it is not immune. At Covent Garden (c. 80% of Capco's assets) we have trimmed our capital growth forecasts, now pencilling in a flat 2H performance (previously +2%), IPD central London shops are down 0.5% in the same period, while Shaftesbury's portfolio was up 0.8% in the six months to Sep-18. Operationally, we anticipate decent LFL rental growth given the £14.8m of pure reversion as at 1H18and the progress made over the period, with a number of new units open and trading (particularly restaurants). We anticipate this will be absorbed by slight yield outshift, given the low 2.3% initial and 3.6% equivalent yield already anticipates this growth. As of 1H18, Capco's LFL NRI was running at 11.6%, or21.1% in absolute terms.EPS ESTIMATES：12/18E: 1.2012/19E: 1.6812/20E: 1.94RIC: CAPCC.LBBG: CAPC LNEarls Court: sale or demerger?Capco announced its board was considering a demerger in May 18 and, if pursued, it envisaged that the demerger would be formalised by the end of 2018. However, in November 2018, Capco acknowledged press speculation that a potential buyer (CK Asset Holdings) was looking to acquire the entire site (excluding Lillie Square), and that there were other interested parties. Hence, the demerger process was likely disrupted. The FY results present the next opportunity to advance preparations. In the meantime, we have seen further weakness in London residential, and evidence that land values have fallen (we estimate typically at 3x the rate of house prices), hence we include a further 10% write down across the estate in our numbers (ECPL has already been marked down 36% since 2016).Analyst:Osmaan Malik, CFA+44-20-7567 3026Valuation: at 239p stock stands at 30% discount.Our PT is based on our economic profit method, with a 5.4% ROIC and 7.9% WACC.Source: This is an extract from UBS research published on 25 January 2019First Read Great Portland Estates - Upbeat 3Q update, good leasing progress beating ERVsHigh quality, sensibly pricedGreat Portland delivered another upbeat trading statement showing continued demand for its offering of "high quality, sensibly priced'* space, despite ongoing political uncertainties. New lettings continued the 1H18 run rate, with £4.3m let, 5.4% ahead of ERV, while £3.4m of rent reviews were settled 6.7% ahead (and 18% above the prior passing rent). There was no update on the rental value growth guidance of -1% to 1.5%, given on 15th Nov. There were no further major disposals announced, and LTV sits comfortably at just 7.3%, highlighting Great Portland's flexibility and position